Kelly McParland: The Ryan plan offers a bold but risky revolution

The Ryan plan offers a bold but uncertain revolution

I wish I was smarter than I am, so I could figure out which conservative has the correct take on Paul Ryan’s plan to save the U.S. economy.

The vice-presidential candidate’s road map for America has Republicans giddy with excitement. They love the notion of a chainsaw being taken to the entitlement culture that has wormed its way into every nook and cranny of the land. They admire the courage of the young Wisconsin congressman in daring to confront the awful reality: the U.S. just can’t afford to pay for all those social welfare programs, popular as they may be. Something has to give, and if means the hard-off become a little harder off, well, it will be good for them in the end.

Once you get past the political euphoria, though, there are the details of the plan itself. And that’s where I get into trouble. Charles Krauthammer, the conservative columnist and TV pundit, argues in a column carried today on Full Comment that Ryan could be to the next U.S. generation what Ronald Reagan became in the 1980s.

Ryan represents a new constitutional conservatism of limited government and individual opportunity that carried Republicans to victory in 2010, not just as a rejection of Obama’s big-government hyper-liberalism but also as a significant departure from the philosophically undisciplined, idiosyncratically free-spending “compassionate conservatism” of Obama’s Republican predecessor.

Ryan’s role is to make the case for a serious approach to structural problems — a hardheaded, sober-hearted conservatism that puts to shame a reactionary liberalism that, with Greece in our future, offers handouts, bromides and a 4.6 percent increase in tax rates.

If Ryan does it well, win or lose in 2012, he becomes a dominant national force. Mild and moderate Mitt Romney will have shaped the conservative future for years to come.

Which may be true. But will the plan itself actually work? David Stockman, an actual Reagan administration member who served as budget chief, says it’s a scam. It is, he says, “devoid of credible math or hard policy choices.”

A true agenda to reform the welfare state would require a sweeping, income-based eligibility test, which would reduce or eliminate social insurance benefits for millions of affluent retirees. Without it, there is no math that can avoid giant tax increases or vast new borrowing. Yet the supposedly courageous Ryan plan would not cut one dime over the next decade from the $1.3 trillion-per-year cost of Social Security and Medicare.

Instead, it shreds the measly means-tested safety net for the vulnerable: the roughly $100 billion per year for food stamps and cash assistance for needy families and the $300 billion budget for Medicaid, the health insurance program for the poor and disabled. Shifting more Medicaid costs to the states will be mere make-believe if federal financing is drastically cut.

Likewise, hacking away at the roughly $400 billion domestic discretionary budget (what’s left of the federal budget after defense, Social Security, health and safety-net spending and interest on the national debt) will yield only a rounding error’s worth of savings after popular programs (which Republicans heartily favor) like cancer research, national parks, veterans’ benefits, farm aid, highway subsidies, education grants and small-business loans are accommodated.

… The Ryan Plan boils down to a fetish for cutting the top marginal income-tax rate for “job creators” — i.e. the superwealthy — to 25 percent and paying for it with an as-yet-undisclosed plan to broaden the tax base. Of the $1 trillion in so-called tax expenditures that the plan would attack, the vast majority would come from slashing popular tax breaks for employer-provided health insurance, mortgage interest, 401(k) accounts, state and local taxes, charitable giving and the like, not to mention low rates on capital gains and dividends. The crony capitalists of K Street already own more than enough Republican votes to stop that train before it leaves the station.

That sounds pretty convincing to me. The Atlantic magazine points out that Stockman has not gone Democratic: his complaint is that Ryan isn’t conservative enough. Yes there will be tax cuts, and there will be spending cuts, but there won’t be nearly enough of the second to pay for the first. Which is exactly what happened to the Reagan revolution, and why Stockman grew disenchanted with it.

William Watson, who writes for the Financial Post, likes the Stockman plan but acknowledges the numbers might not be all that reliable.

They’re in nominal dollars so they don’t take inflation into account and as a result exaggerate the real growth of taxes and public spending. They’re not based on any very detailed analysis. They make assumptions that may turn out to be heroic about economic growth. They can’t even be relied on as a rough estimate of first fiscal steps since in the U.S. system, unlike our own, the legislature routinely alters presidential budgets beyond recognition. The president’s numbers may start the debate but Congress finishes it. And so on and so on.

In addition, the plan doesn’t actually balance the budget: “The deficit is still 1.2% of GDP in 2022. But it does get the overall debt falling as a share of GDP, which puts the U.S. government back on a sustainable fiscal path. You can keep the debt growing forever — if you think that’s a good idea — so long as the economy is growing faster.”

Its secret is that it actually raises tax revenue, big time.

The summary tables to that document contemplate federal revenues rising from $2.4-trillion in 2012 to $4.6-trillion in 2022 — basically a doubling of revenue and in absolute terms a whopping $2.2-trillion increase. At the same time, federal government outlays rise from $3.6-trillion in 2012 to $4.8-trillion in 2022, an increase of 50%. Not nearly as much as the rise in taxes but not chicken feed, either.

So the big, daring, revolutionary conservative game plan is actually a tricky way to jack up tax revenues. Which is fine with me, if it means the U.S. avoids tipping into the abyss. But it’s still based on a lot of assumptions, and political assumptions, in my experience, have a way of not happening. Meanwhile, seniors and the struggling middle class will bear the brunt of the changes of what amounts to a giant financial experiment, while many of the people cheering for it will be insulated from its impact. All this based on a plan by a guy who has never had a job outside government.

Doesn’t sound all that convincing to me. I’d like it to work, but I wouldn’t be willing to bet my pension on it.

In the wake of a Grammy Awards ceremony that disappointed many, from Kanye West to the masses on Twitter lamenting the state of pop music, a historical perspective is key. Few are better poised to offer one than Andy Kim.